Futures and Options Trading remains one of the most popular ways
to speculate on the movements of the world's markets. In recent
years these previously exclusive products have been opened up to a
much larger retail audience, a new group of customers that in turn
has been at the forefront of demands for improvements to online
trading platforms.
This has resulted in a number of easy to use, yet advanced
trading systems being released onto the market catering for all
types of trader, from the person looking to trade the occasional 1
lot to the more serious algorithmic professional day trader.
Do your research
As with any type of investment it is important to go into
trading with your eyes wide open and to be aware that just as an in
other industries there will be those who will try to convince you
that they have a trading system that is almost guaranteed to
make you money. The word 'almost' is the most important one here
because there are no guaranteed systems and whilst there will be
some technical and fundamental analysis programmes that will
produce consistent trading results there will also be a host of
them that won't.
Tip: Please, please
don't waste your hard earned money with people who claim to have
the answers to making money from the markets. If they had these
answers do you really think they would be sharing them with anyone
else?
So if there isn't a sure fire system that will guarantee returns
how do traders make money? Well the truth is that it takes time and
discipline to be a successful trader and so before beginning to
trade it is important to learn as much as you can about your chosen
market, understand what makes it move, when it trades and how
volatile it can be.
Contract information is readily available from the exchanges
like the CME, CBOT or EURONEXT LIFFE and can be found in the public
areas of their websites. Many futures brokers will also be happy to
assist you with further information about the markets you wish to
trade and whilst 'execution only' brokers are unable to advise
you on your trading strategy, they are able to provide
factual information about the markets and the contract
specifications.
Discretionary and Advisory Brokers
If you aren't keen to trade your own account you could look to
employ the services of a broker who offers a managed account
service. This is a completely different proposition and involves
you opening an account with the broker, depositing your funds and
allowing them to trade with your money. All of the brokers offering
these services are fully qualified and highly regulated and so if
you do choose to go down this route research your broker and ask as
many questions as possible about past performance and how they
intend to trade with your cash.
Tip: If you opt for this
type of account be prepared to pay considerably higher commission
charges than if you were trading yourself. You are paying for the
expertise of your broker and so your costs to trade will reflect
this.
Going it Alone
Many individuals decide that they would rather be in control of
their own funds and trading decisions and so apply for personal
accounts with their chosen broker.
When deciding which broker to use, take time to look at the
value added services on offer with each one. The last 5 years has
seen a real squeeze on commissions resulting in many brokers
offering cut price execution costs that reduce the cost of dealing
considerably. Reducing your costs means the greater potential for
profits but sometimes the cheapest doesn't always deliver the best
service.
Look for Value Added Services
If you are new to futures trading it may be wise to look for a
broker that offers some additional services that are likely to
help you through the first few months such as a telephone support
desk, access to research and charting and a dedicated customer
service department. Saving 25p per lot traded is all well and good
but sometimes paying a little more for a higher level of service is
the right thing to do.
There are a number of excellent trading education workshops
available that are worth attending, especially if futures trading
is new to you. Many of these courses are supported by the
large futures exchanges and are delivered by experienced and
knowledgeable market professionals who have witnessed almost every
market scenario. Using their experience and knowledge to gain
a better understanding of the products you wish to trade and
methods that can be employed is very valuable and should
definitely be considered.
Tip: Whilst these
trading courses and workshops can be very valuable make sure you
understand the content of the course before you attend. There's
nothing worse than paying money to listen to advice that is either
too advanced or simply not relevant to you.
Further resources on Futures trading
Comparing Futures brokers
Below is a table of Futures brokers with a few key
account-opening criteria that we believe should be considered when
you are deciding which broker to open an account with. It's not
always about price; finding a broker that suits your style of
trading and your technical requirements is as, if not more,
important than shaving a few pence off of your dealing costs.
Start comparingFutures brokers
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